China unhappy with US Treasury investments - "Shape up, or else!"

[Tock]

http://www.btimes.com.my/Current_New...horry/Article/


BEIJING: China's premier expressed concern yesterday about its holdings of Treasuries and other US debt, appealing to Washington to safeguard their value, and said Beijing is ready to expand its stimulus if economic conditions worsen.

Premier Wen Jiabao noted that Beijing is the biggest foreign creditor to the US and called on Washington to see that its response to the global slowdown does not damage the value of Chinese holdings.

"We have made a huge amount of loans to the US. Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried," Wen said at a news conference following the closing of China's annual legislative session.

"I would like to call on the US to honour its words, stay a credible nation and ensure the safety of Chinese assets."

Analysts estimate that nearly half of China's US$2 trillion (US$1 = RM3.70) in currency reserves are in US Treasuries and notes issued by other government-affiliated agencies.

Wen's comments foreshadowed possible appeals to President Barack Obama, who will meet with Chinese President Hu Jintao at a London summit of leaders of the G-20 group of major economies on April 2 to discuss the global financial crisis.

Washington is counting on China to continue buying Treasuries to fund its massive stimulus package. Last month, visiting Secretary of State Hillary Rodham Clinton sought to reassure Beijing that government debt would remain a reliable investment.

China's foreign minister, Yang Jiechi, said on Wednesday during a visit to Washington that Beijing wants to "strengthen macroeconomic policy dialogue" with the Obama administration.

"They are worried about forever-rising deficits, which may devalue Treasuries by pushing interest rates higher," said JP Morgan economist Frank Gong. "Inside China there has been a lot of debate about whether they should continue to buy Treasuries."

The comments come as finance ministers and central bankers of the Group of 20 gather in London this weekend to discuss the crisis and possible remedies.

Splits emerged ahead of the key meeting, with the US and Japan calling for more stimulus spending and European leaders pushing tougher regulations as the best route out of the crisis.

US Treasury Secretary Timothy Geithner is pressing for a new coordinated stimulus but European governments are reluctant to take on more debt before they see how current plans are working. The Europeans want to emphasise the need for greater regulation of markets, including a crackdown on tax havens and increased control over hedge funds.

In Beijing, Wen expressed confidence China can emerge from its slump "at an early date," and said the government is ready to expand its 4 trillion yuan, or US$586 billion, stimulus to boost growth in the world's third-largest economy.

"We already have our plans ready to tackle even more difficult times and to do that we have reserved adequate ammunition," Wen said. - AP

[Tock]

http://www.startribune.com/business/41232107.html

Treasury prices mixed after stocks rally, China expresses anxiety about US debt

Associated Press
Last update: March 13, 2009 - 4:51 PM


NEW YORK - Treasury prices ended mixed Friday, with 30-year bonds falling after China expressed concern about holding U.S. debt.
Treasurys held up decently this week despite the big rise in the stock market. Typically government debt is regarded as an alternative to stocks. But strong reception this week to U.S. debt auctions indicated to investors that demand for Treasurys remains high.
The U.S. government, selling debt at a record pace to fund its economic and financial rescue efforts, auctioned $63 billion this week in long-term government securities.
Some skepticism returned, however, when Chinese Premier Wen Jiabao expressed concern Friday about its massive holdings of Treasurys and other U.S. debt. Beijing, he noted, is the biggest foreign creditor to the United States.
"We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried," Wen said at a news conference following the closing of China's annual legislative session. "I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets."
As the Dow Jone industrial average rose 54 points, the benchmark 10-year Treasury note fell 8/32 to 98 24/32. Its yield rose to 2.90 percent from 2.89 percent late Thursday. Prices move opposite yields.
The two-year note rose 3/32 to 99 26/32, and its yield fell to 0.97 percent from 1.01 percent.
The 30-year bond fell 1 5/32 to 96 25/32, and its yield rose to 3.68 percent from 3.61 percent.
The yield on the safe-haven three-month Treasury bill was unchanged at 0.20 percent. The discount rate was 0.21 percent.
The cost of lending between banks was flat. The British Bankers' Association said the London Interbank Offered Rate, or Libor, on three-month loans in dollars remained at 1.32 percent. Libor is down significantly from its peak last fall, but up from its mid-January low of 1.08 percent.

[Tock]

http://news.yahoo.com/s/ap/200***14/..._us_economy_18

BEIJING – China's premier didn't say it in so many words, but the implied warning to Washington was blunt: Don't devalue the dollar through reckless spending. Premier Wen Jiabao's message is unlikely to be misunderstood at the White House. It is counting on Beijing to help pay for its stimulus package by buying U.S. bonds. China already is Washington's biggest foreign creditor, with an estimated $1 trillion in U.S. government debt. A weaker dollar would erode the value of those assets.
"Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried," Wen said at a news conference Friday after the closing of China's annual legislative session. "I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets."
The appeal suggested the outlines of Chinese President Hu Jintao's stance when he meets with President Barack Obama at an April 2 summit in London of the Group of 20 major economies on possible remedies for the global crisis.
Wen gave no indication whether Beijing wants changes in U.S. policy. But economists said his comments reflect fears that higher U.S. budget deficits from Washington's $787 billion stimulus package could drive down the dollar and the value of China's Treasury notes.
"China is telling the U.S. to be careful, not to overspend and keep an eye on the dollar," said Kelvin Lau, regional economist at Standard Chartered in Hong Kong. "There are risks that China cannot control, so they're depending on the U.S. to maintain fiscal prudence and keep the dollar reasonably stable."
In Washington, White House press secretary Robert Gibbs responded to Wen's concerns by saying the Chinese should rest assured because investments in the U.S. are the safest in the world.
Gibbs also said Congress can help by passing Obama's budget for next year, which promises to halve the deficit by the end of his term.
Analysts estimate China keeps nearly half of its $2 trillion in foreign currency reserves in U.S. Treasuries and notes issued by other government-affiliated agencies.
"Inside China there has been a lot of debate about whether they should continue to buy Treasuries," said Frank Gong, chief China economist for JP Morgan.
Beijing is trying to increase its leverage at the London G-20 meeting by reminding its partners of its role in financing U.S. spending, Gong said.
"Without China's buying (Treasuries) and continuing to fund U.S. deficit spending, interest rates could have been much higher. That could be very destabilizing in this very recessionary environment," he said. "By attracting a lot of attention to this issue, China is already increasing its influence ahead of the G-20 meeting."
Finance officials from the G-20 meet this weekend. U.S. Treasury Secretary Timothy Geithner is pressing for a new coordinated global stimulus. Japan is supportive but European governments are reluctant to make expensive commitments before they see how current plans are working.
Wen also offered an unqualified defense Friday of his government's policies in Tibet, ignoring questions about a massive security buildup in the Himalayan region.
Tensions have spiked ahead of two key anniversaries this week — the 50th anniversary of a failed Tibetan uprising that sent the Dalai Lama into exile and Saturday's one-year anniversary of violent anti-Chinese riots in Lhasa that sparked the largest protests in decades.
Asked whether the massive security presence pointed to failings in Beijing's policies, Wen said: "The situation in Tibet is on the whole peaceful and stable. The Tibetan people hope to work in peace and stability.
"Tibet's continuous progress (has) proven the policies we have adopted are right," he said.
Wen expressed confidence the world's third-largest economy can meet its official growth target of 8 percent this year and emerge from the crisis "at an early date." But he said Beijing is ready to expand its 4 trillion yuan ($586 billion) stimulus if needed.

"We already have our plans ready to tackle even more difficult times, and to do that we have reserved adequate ammunition," he said. "That means that at any time we can introduce new stimulus policies."
Communist leaders worry about rising job losses and possible unrest amid a trade slump that saw Chinese exports fall 25.7 percent in February from a year earlier. They have promised to spend heavily to create jobs and boost exports.
Chinese bank lending and power demand have risen, suggesting the stimulus is taking effect. But growth in retail sales is weakening, indicating it has yet to spur private sector spending and investment, which analysts say will be key to its success.
Private sector economists expect growth as low as 5 percent this year. That would be the strongest of any major country but could lead to more waves of job cuts.
"I really believe we will be able to walk out of the shadow of the financial crisis at an early date," Wen said. "After this trial, I believe the Chinese economy will show greater vitality."
Wen also said Beijing wants the G-20 summit in April focus on helping the poorest countries.
The premier said Beijing has met its own commitments to help developing countries by erasing a total of $40 billion in debt owed by 46 countries and giving out 200 billion yuan ($29 billion) of aid to developing countries." "We must see to it that we show concern for developing countries," he said

[eliteforce]

the Chinese are gonna wind up losing their money one day, if the economic situation gets too dire in the US, then the people will start exploring ways to overthrow the regime and put a new one in place, but they will realize that a big part of Americas woes half to do with all this debt and will start looking for alternatives to pay it back.. the Chinese and other lenders have to make sure a government that is borrowing money from them has some kind of collateral, for example investments private American entities have in China, which includes everything from starbucks to shoe factories to stock in Chinese company's.. if the US govt defaults they could try to confiscate such things right out of private hands.. but is all that stuff worth as much as the government borrowed from them? probably not even close..need a statistic on that one i guess.. direct American investment in China..